9911796707
TMI Blog2024 (10) TMI 725X X X X Extracts X X X X X X X X Extracts X X X X ..... the total default of Rs.74,99,25,691/- and date of default as 15.08.2016 on 27.01.2020. During the pendency of Section 7 application, by Assignment Agreement dated 29.03.2022, the debt was assigned to 'Phoenix Arc Pvt. Ltd.'- Respondent No.2 herein and an IA (IBC) 504/KB/2022 was filed by 'Phoenix Arc Pvt. Ltd.' praying for its substitution in place of 'L&T Finance Ltd.'. Subsequent to filing of the IA (IBC) 504/KB/2022, the Corporate Debtor filed an IA (IBC) 1371/KB/2023 seeking a direction to 'L&T Finance Ltd.' to produce the original Assignment Agreement dated 29.03.2022 and to impound the original agreement. Adjudicating Authority heard the parties on both the applications and by impugned order has allowed the IA (IBC) 504/KB/2022 permitting substitution of 'Phoenix Arc Pvt. Ltd.' and dismissed the IA (IBC) 1371/KB/2023. Challenging the impugned order, this appeal has been filed by the Corporate Debtor. 2.We have heard Shri Abhijeet Sinha, Learned Senior Counsel for the Appellant, Shri Vishesh Kalra, Learned Counsel for the Respondent No.1 and Shri Krishnendu Datta, Learned Senior Counsel for the Respondent No.2. 3.Shri Abhijeet Sinha, Learned Senior Counsel for the Appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment. Counsel for the Respondent has relied on the provision of SARFAESI Act, 2002 which empowers the assignee to continue prosecute and enforce all applications, appeals and legal proceedings which were pending on the date of assignment. Section 7 application filed by 'L&T Finance Ltd.' was pending on the date of assignment. Hence, 'Phoenix Arc Pvt. Ltd.' has jurisdiction to prosecute the application. 7.We may refer to the provision of the SARFAESI Act. Section 5 of the SARFAESI Act, 2002 is as follows:- "5. Acquisition of rights or interest in financial assets.-(1) Notwithstanding anything contained in any agreement or any other law for the time being in force, any [asset reconstruction company] may acquire financial assets of any bank or financial institution- (a)by issuing a debenture or bond or any other security in the nature of debenture, for consideration agreed upon between such company and the bank or financial institution, incorporating therein such terms and conditions as may be agreed upon between them; or (b)by entering into an agreement with such bank or financial institution for the transfer of such financial assets to such company on such terms and condition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hey had been issued in favour of [asset reconstruction company], as the case may be. (4)If, on the date of acquisition of financial asset under sub-section (1), any suit, appeal or other proceeding of whatever nature relating to the said financial asset is pending by or against the bank or financial institution, save as provided in the third proviso to sub-section (1) of section 15 of the Sick Industrial Companies (Special Provisions) Act, 1985 (1 of 1986) the same shall not abate, or be discontinued or be, in any way, prejudicially affected by reason of the acquisition of financial asset by the [asset reconstruction company], as the case may be, but the suit, appeal or other proceeding may be continued, prosecuted and enforced by or against the [asset reconstruction company], as the case may be. [(5) On acquisition of financial assets under sub- section (1), the [asset reconstruction company], may with the consent of the originator, file an application before the Debts Recovery Tribunal or the Appellate Tribunal or any court or other Authority for the purpose of substitution of its name in any pending suit, appeal or other proceedings and on receipt of such application, such Deb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... law for the time being in force...". Section 5 is an enabling provision to empower the Asset Reconstruction Company to acquire financial assets in the manner provided in Sub- section (1). The Assignment Agreement dated 18.01.2021 was in accordance with Section 5(1)(b) i.e. by entering agreement with State Bank of India. Sub-section (2) of Section 5 contains a deeming clause. Sub- section (2) provides that Asset Reconstruction Company on such acquisition be deemed to be the lender and all the rights of such bank or financial institution shall vest in such company. When the legislature uses the deeming fiction it is always for purpose and object. 8.Hon'ble Supreme Court had occasion to consider provision of Section 43 of the Indian Contract Act, 1872 which contains the deeming provision and on fulfilling the ingredients as provided in the statute, legal fiction will come into play, irrespective whether the transaction was in fact intended or even anticipated to be so. We may refer to Para 22.2.1, 22.2.2 and 22.3 of the judgment of the Hon'ble Supreme Court in "Anuj Jain, Interim Resolution Professional for Jaypee Infratech Limited vs. Axis Bank Ltd. & Ors., MANU/SC/0228/202 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tive Societies and Anr.: MANU/SC/0203/2009: (2009) 14 SCC 302 on various features of the processes of construction of different deeming provisions in different contexts. Some of the relevant parts of such extraction (as occurring in paragraph 95 of Pioneer Urban) read as follows (in SCC at pp. 524): " '... The word "deemed" is used a great deal in modern legislation. Sometimes it is used to impose for the purposes of a statute an artificial construction of a word or phrase that would not otherwise prevail. Sometimes it is used to put beyond doubt a particular construction that might otherwise be uncertain. Sometimes it is used to give a comprehensive description that includes what is obvious, what is uncertain and what is, in the ordinary sense, impossible. (Per Lord Radcliffe in St. Aubyn v. Attorney General:1952 AC 15 (HL), AC p. 53) 14.'Deemed', as used in statutory definitions [is meant] 'to extend the denotation of the defined term to things it would not in ordinary parlance denote, is often a convenient devise for reducing the verbiage of an enactment, but that does not mean that wherever it is used it has that effect; to deem means simply to judge or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion would come into play; and such transaction entered into by a corporate debtor would be regarded as preferential transaction with the attendant consequences as per Section 44 of the Code, irrespective whether the transaction was in fact intended or even anticipated to be so." 9.Following the law laid down by the Hon'ble Supreme Court in the above case, when acquisition of assets by Asset Reconstruction Company is made as per Section 5(1), deeming provision contained in Sub-section (2) of Section 5 shall come into play and the Asset Reconstruction Company shall be deemed to be Lender for all purposes. As a Lender, the Respondent No.1 was fully entitled to exercise its right to initiate proceeding under Section 7." 9.By virtue of Section 5(2) of the SARFAESI Act, 'Phoenix Arc Pvt. Ltd.' is fully entitled to prosecute the application which was filed by 'L&T Finance Ltd.'. Present is a case where Assignment Agreement is a registered document. This Tribunal in "Pawan Kumar Manguturam Bairagra" (supra) in paragraph 27 has laid down following:- "27. We, thus, are of the view that on the strength of Sub-section (2) of Section 5 of SARFAESI Act when Respondent No.1 has acquired ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dgment as follows: "224. The conclusions reached in this judgment are summarised below: a. Agreements which are not stamped or are inadequately stamped are inadmissible in evidence under Section 35 of the Stamp Act. Such agreements are not rendered void or void ab initio or unenforceable; b. Non-stamping or inadequate stamping is a curable defect; c .An objection as to stamping does not fall for determination under Sections 8 or 11 of the Arbitration Act. The concerned court must examine whether the arbitration agreement prima facie exists; d. Any objections in relation to the stamping of the agreement fall within the ambit of the arbitral tribunal; and e. The decision in NN Global 2 (supra) and SMS Tea Estates (supra) are overruled. Paragraphs 22 and 29 of Garware Wall Ropes (supra) are overruled to that extent." 13.Counsel for the Appellant sought to distinguish the judgment of this Tribunal in "Pawan Kumar Manguturam Bairagra" (supra) on the ground that in the said case, complaint was filed by the Appellant himself regarding deficiency of stamp duty before the Collector which complaint was pending and in the present case, no complaint has been filed by the Corporate ..... X X X X Extracts X X X X X X X X Extracts X X X X
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